Ada County Highway District v. Rhythm Engineering, LLC

Filing 49

MEMORANDUM DECISION AND ORDER It is hereby ORDERED: 1) Defendant's Motion for Leave to Serve Supplemental Responses to Plaintiff's First Set of Requests for Admission (Dkt. 39 ) is GRANTED. Defendant must serve its amended responses to Re quests for Admission Nos. 29 , 30 , and 32 no later than 7 days after the date of this Order; 2) Defendant's Motion to Amend Counterclaim (Dkt. 40 ) is GRANTED. Defendant must file its proposed amended counterclaim by May 1, 2017. Signed by Judge Candy W. Dale. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (jp)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO

ADA COUNTY HIGHWAY
DISTRICT,

Case No. 1:15-cv-00584-CWD

Plaintiff,

MEMORANDUM DECISION AND
ORDER RE:

v.
MOTION FOR LEAVE TO SERVE
SUPPLEMENTAL RESPONSES (DKT.
39); AND

RHYTHM ENGINEERING, LLC,
Defendant.

MOTION TO AMEND
COUNTERCLAIM (DKT. 40)

INTRODUCTION
Pending before the Court are Defendant Rhythm Engineering, LLC’s Motion for
Leave to Serve Supplemental Responses to Plaintiff’s First Set of Requests for
Admission and Motion to Amend Counterclaim. (Dkt. 39, 40.) The motions are fully
briefed and the Court heard oral argument from the parties on April 12, 2017. After
review of the record, consideration of the parties’ arguments and relevant legal
authorities, and otherwise being fully advised, the Court issues the following
memorandum decision and order granting both motions.
MEMORANDUM DECISION AND ORDER - 1

FACTUAL BACKGROUND 1
On January 8, 2014, the Ada County Highway District (ACHD) and Rhythm
Engineering, LLC (Rhythm), entered into a purchase agreement 2 for the installation of an
adaptive signal control technology (ASCT) system on roads throughout Ada County.
Adaptive signal control technology systems are made up of hardware and software,
which together, help control the flow of traffic over busy roads.
The Purchase Agreement between ACHD and Rhythm contained a two year
warranty. Compl., ¶ 9. Rhythm agreed to provide a full refund if, after three months of
adaptive operation, ACHD believed the ASCT system did not reduce travel time and
emission and fuel consumption, while also improving safety. To receive a full refund,
ACHD had to: (1) collect before and after data using the same collection method; (2)
allow Rhythm time to “fine tune” the ASCT; and (3) provide a written list of concerns to
Rhythm. Id.
The Purchase Agreement provided specific terms for ACHD’s acceptance of the
ASCT system. (Dkt. 39-5 at 7-61.) In part, the Purchase Agreement detailed explicit
terms for ACHD to perform validation testing (VAL-T) prior to acceptance of the ASCT
system by ACHD. The last day of successful VAL-T was also defined as the contractual
acceptance date of the ASCT system. This contractual acceptance of the system would

1

To provide context in understanding these motions, the factual background is taken from ACHD’s
Complaint. However, this does not constitute factual findings by the Court.

2

The Adaptive Signal Control Technology Purchase Agreement is comprised of three sections: (1) Scope
of Work; (2) Work Schedule; and (3) Payment Schedule. (Dkt. 39-5 at 7-61.)

MEMORANDUM DECISION AND ORDER - 2

occur when the ACHD Traffic Engineer granted final approval of the VAL-T process,
indicating successful completion. Id.
VAL-T involved two distinct testing processes to be completed sequentially over
60 days. The first phase was called Systems Communication Testing (SCT). SCT
involved testing “the virtual system server software, the system network communications,
and all other elements of the ASCT, through the use of the client workstation in
controlling all of the project intersections.” Id. at 21. The second phase, called Field
Operational Testing (FOT), involved “observation of the two main ASCT project
corridors, State Street and Chinden Boulevard. . . . [to] ensure the intersections on the two
main corridors are operating as required [for 60 days] in the ACHD Concept of
Operations and per the System Requirements.” Id. at 22.
Between December of 2014 and October of 2015, ACHD and Rhythm
corresponded in writing and discussed in-person problems with the ASCT system.
Compl., at ¶ 11. Rhythm attempted to correct the system’s problems; however, ACHD
claims Rhythm’s attempts were not successful. 3

3

On December 23, 2015, ACHD emailed Rhythm regarding hundreds of notifications ACHD received
with the message “camera unresponsive.” Compl., ¶ 12. This forced ACHD to suspend testing of the
ASCT system. Id. On March 3, 2015, ACHD notified Rhythm of detection issues related to the ASCT
system’s cameras going into “fog mode,” which apparently caused the system to use historical data rather
than then-current conditions. Id. at ¶ 13. ACHD suspended testing again while Rhythm identified
potential fixes to the problem. On June 3, 2015, and again on September 18, 2015, ACHD informed
Rhythm the potential fixes did not resolve the “fog mode” issue. Id. at ¶ ¶ 14-15.

MEMORANDUM DECISION AND ORDER - 3

On November 9, 2015, ACHD notified Rhythm of its rejection of the ASCT
system and termination of the Purchase Agreement. 4 Id. at ¶ 19. ACHD identified Section
C.12 of the Purchase Agreement as the basis for termination, 5 asserting the ASCT system
failed FOT three times by failing to automatically adjust based on the traffic conditions
and reducing side street delays. Id. In its termination notice, ACHD demanded a full
refund. Id.
Three days later, Rhythm responded to the termination notice, informing ACHD it
did not have the right to terminate the Purchase Agreement under Section C.12, ACHD’s
rejection of the ASCT system was untimely under the Idaho Uniform Commercial Code,
and ACHD failed to comply with the conditions of the warranty. Id. at ¶ 20. Rhythm
demanded ACHD return the ASCT system equipment within 30 days for a refund under
the warranty. On December 8, 2015, ACHD attempted to return the ASCT system
equipment to Rhythm via Federal Express overnight delivery; Rhythm refused to accept
delivery of the equipment. Id. at ¶¶ 24-25.
PROCEDURAL BACKGROUND
On December 16, 2015, ACHD filed its Complaint against Rhythm asserting the
following claims: (1) breach of contract; (2) breach of express warranty; (3) breach of
implied warranty of merchantability; (4) breach of implied warranty of fitness for a

4

Before informing Rhythm of its intent to terminate the Purchase Agreement, ACHD first received
approval to terminate the Purchase Agreement from the Idaho Transportation Department. Compl., ¶¶ 1718.

5

ACHD cited also other legal remedies under Section 12.3 of the Purchase Agreement and remedies
under the Idaho Uniform Commercial Code.

MEMORANDUM DECISION AND ORDER - 4

particular purpose; and (5) unjust enrichment. ACHD seeks a full refund of the costs of
the ASCT system and attorney fees.
On September 16, 2016, ACHD served 57 Requests for Admission on Rhythm.
(Dkt. 39-1 at 2.) After receiving an extension of time from ACHD, Rhythm responded.
Id. At issue here is whether Rhythm may amend their admissions to request numbers 29,
30, and 32—all which relate to the completion and approval of VAL-T, and acceptance
of the ASCT system. Id. at 4. Rhythm contends it initially admitted these three requests
for admissions, because it relied on ACHD’s representations that VAL-T had not been
completed. Id. However, Rhythm claims later deposition testimony and other discovery
revealed the information Rhythm relied upon was incorrect, and VAL-T had, in fact, been
completed before ACHD returned the ASCT system equipment. Id. Consequently,
because VAL-T was completed, Rhythm contends there was a contractual acceptance of
the ASCT system by ACHD. Id. In contrast, ACHD contends VAL-T was never
completed, and there was no contractual acceptance of the ASCT system.
Following Rhythm’s responses to ACHD’s requests for admission, the parties
conducted additional discovery, including depositions, over the next few months. Hess
Decl. (Dkt. 44-1 at ¶5.) Rhythm conducted depositions of six ACHD employees from
December 7, 2016, through February 16, 2017. ACHD deposed eight Rhythm employees
between December 1, 2016, and February 13, 2017. Four of these eight depositions took
place in Kansas City, Missouri, on February 6 and 7. Following the out-of-town
depositions, Rhythm served the motions at issue on ACHD on the afternoon of February
7, 2017. Id.
MEMORANDUM DECISION AND ORDER - 5

Rhythm contends, during the course of these depositions, it discovered pertinent
information contrary to information previously provided by ACHD during the VAL-T
process—which Rhythm had taken at face value, and relied upon, in drafting both its
responses to requests for admissions and its counterclaim. Most specifically, Mike
Boydstun, ACHD Traffic Operations Engineer, testified during his deposition he believed
the second phase of VAL-T process, FOT, began on November 19, 2014, the day
following completion of the SCT phase, and continued, uninterrupted, until December
23, 2014. (Dkt. 39-1 at 5.) It is undisputed that ACHD restarted FOT on February 4,
2015. Id.
Rhythm asserts the testimony from Boydstun, combined with the undisputed FOT
restart date, establishes the required 60 days of FOT, and consequently VAL-T, was
completed successfully on February 28, 2015, contrary to ACHD’s assertions that the
VAL-T testing was not successfully completed. Id. Rhythm arrived at this date of
completion based on the following testing periods totaling 60 days:
• 35 days – FOT started on November 19, 2014, and suspended December
23, 2014 by Jim Larsen, ACHD Supervisor of Suspension Management.
• 25 days – FOT resumed on February 4, 2015, and completed February 28,
2015, upon reaching 60 days with no suspension during the second time
period.
Finally, because the last day of successful VAL-T is defined as the contractual
acceptance date of the ASCT system, Rhythm asserts contractual acceptance of the
ASCT system also occurred on February 28, 2015. Id. ACHD disputes these calculations
and Rhythm’s contractual acceptance argument.
MEMORANDUM DECISION AND ORDER - 6

DISCUSSION
I. Motion for Leave to Serve Supplemental Responses (Dkt. 39)
As part of discovery in this case, ACHD served Requests for Admission on
Rhythm. Rhythm contends it answered three of these requests based on incorrect
calculations regarding the number of days remaining in FOT which were provided by
ACHD during the VAL-T process. Rhythm asserts it later learned, during discovery, the
information it originally relied upon was incorrect. Therefore, Rhythm argues it should be
allowed to amend its answers to the three requests and serve supplemental responses
which conform to the newly discovered information.
A. Standard of Law
Fed. R. Civ. P. 36(b) provides in pertinent part:
Subject to Rule 16(e), the court may permit withdrawal or amendment if it
would promote the presentation of the merits of the action and if the court
is not persuaded that it would prejudice the requesting party in maintaining
or defending the action on the merits.
Under this Rule, a two-part test must be satisfied prior to permitting an admission to be
withdrawn or amended: “(1) presentation of the merits of the action must be subserved,
and (2) the party who obtained the admission must not be prejudiced by the withdrawal.”
Hadley v. United States, 45 F.3d 1345, 1348 (9th Cir. 1995).
“The first half of the test in Rule 36(b) is satisfied when upholding the admissions
would practically eliminate any presentation of the merits of the case.” Id. “The party
who obtained the admission has the burden of proving that withdrawal of the admission
would prejudice the party’s case.” Id. “Courts are more likely to find prejudice when the
MEMORANDUM DECISION AND ORDER - 7

motion for withdrawal is made in the middle of trial.” Id. When the motion is made
during discovery, however, amendment or withdrawal of admissions is generally an
inconvenience rather than a prejudice. See id.
B. Analysis 6
1. Presentation of the Merits
Here, presentation of the merits of the breach of contract claims asserted by the
parties depends, at least in part, on how the factual dispute regarding completion of the
VAL-T process is resolved. Thus, presentation of the merits of this action would not
likely be subserved if Rhythm’s three admissions are not amended. Rhythm’s admissions
and proposed amended responses relate to the contractual acceptance of the ASCT
system, and are as follows:
Request for Admission No. 29: Please admit that VAL-T testing was not
successfully completed for the ASCT system.
Response to Request for Admission No. 29: Admit that ACHD did not
complete the VAL-T testing in the FOT phase.
Amended Response to Request for Admission No. 29: Denied.
Under
ACHD’s contractual requirements and obligations for VAL-T, SCT was
completed on November 18, 2014 and FOT began on November 19, 2014.
On December 23, 2014, FOT was suspended. On February 3, 2015, ACHD
informed Rhythm Engineering that FOT would restart on February 4, 2015.
The contractual 60-day time period for FOT expired on March 1, 2015.
Pursuant to the contractual terms and conditions of testing the ASCT
6

ACHD also argues Rhythm neglected to comply with the meet and confer requirements of Dist. Idaho
Loc. Civ. R. 37.1. (Dkt. 44 at 7.) Rather than meeting and conferring with ACHD regarding its proposed
amended admissions, Rhythm served its motion to serve supplemental responses at “the conclusion of a
set of four depositions of Rhythm employees.” Id. Rhythm contends ACHD mischaracterizes the present
motion as a discovery motion, and argues there is no meet and confer requirement for motions filed under
Fed. R. Civ. P. 36(b). (Dkt. 45 at 3.) ACHD’s argument is moot, as it does not claim it would have agreed
to amendment of the admissions without Court approval. Further, during oral argument, ACHD conceded
it is not asking the Court to deny Rhythm’s motion based on a failure to meet and confer.

MEMORANDUM DECISION AND ORDER - 8

system, the time period for VAL-T was successfully completed on March
1, 2015.
Request for Admission No. 30: Please admit that ACHD did not provide
final acceptance of the ASCT system.
Response to Request for Admission No. 30: Admit that ACHD refused to
complete the FOT phase in spite of no failure being found, and therefore
did not provide final acceptance.
Amended Response to Request for Admission No. 30: Denied. The 60-day
contractual time period for VAL-T expired on March 1, 2015. The
completion of VAL-T is one of the requirements for final acceptance of the
ASCT system.
...
Request for Admission No. 32: Please admit that “Final VAL-T Testing
approval” was not granted by the ACHD traffic engineer because all VALT had not been successfully completed.
Response to Request for Admission No. 32: Admit that ACHD refused to
complete the FOT phase in spite of no failure being found, and therefore
the ACHD traffic engineer did not give final approval of the VAL-T
testing.
Amended Response to Request for Admission No. 32: Denied. The 60 day
contractual time period for VAL-T expired on March 1, 2015.
Rhythm argues, when responding to ACHD’s requests for admission, Rhythm
relied upon ACHD’s representations provided via email exchanges during December of
2014 and throughout 2015, regarding the dates FOT was suspended, restarted, and
ultimately terminated. (Dkt. 39-1 at 4-5, 45 at 4-5.) However, Rhythm asserts it later
discovered FOT, and therefore VAL-T, was actually completed by ACHD. Id. Rhythm
argues it had no choice but to rely on ACHD’s representations at the time Rhythm made
its initial admissions, because ACHD was in control of the VAL-T testing, and it was not
until discovery when Rhythm had the opportunity to learn what actually occurred. Id.
MEMORANDUM DECISION AND ORDER - 9

Because the calculations are pertinent to determining whether there was a contractual
acceptance of the ASCT system, Rhythm argues it should be allowed to supplement its
responses to ACHD’s requests for admissions with accurate responses based on what it
learned during discovery. Id.
ACHD argues Rhythm relies only on Boydstun’s deposition testimony—later
contradicted by his declaration filed by ACHD—as support for its motion. Following
Rhythm’s filing of this motion, ACHD filed a declaration of Boydstun which attempts to
correct his deposition testimony. (Dkt. 44-6.) His declaration indicates he reviewed his
personal calendars which were not available to him during his deposition, and concludes
the FOT could not have started before November 21, 2014. 7 Id. Rhythm asserts ACHD
misrepresents the record. (Dkt. 45 at 6.) Rhythm contends it relies on evidence supported
by the record, including email correspondence from Bruce Mills, ACHD Deputy Director
of Engineering, as well as Boydstun’s deposition testimony, which support Rhythm’s
contention that its original admissions were incorrect regarding the VAL-T testing. Id.
During oral argument, ACHD conceded that getting disputed versions of the facts
before the Court or jury would promote trying the case on its merits. Therefore, the Court
finds the first half of the test under Rule 36(b) is satisfied: allowing Rhythm to “amend
their admission[s] would aid in the resolution of this case on the merits.” Arguello v. Lee,
No. CV-06-485-E-BLW, 2008 WL 4997501, at *2 (D. Idaho May 14, 2008).

7

Boydstun’s date estimation is based on his review of the dates Grant Niehus, a Rhythm employee, was
in Boise to configure the ASCT system and train ACHD employees on the system. Id. Boydstun’s
declaration further states his belief FOT could not have started until the Rhythm employee left Boise;
however, it also states Boydstun was out of the office on November 21, 2014. Id.

MEMORANDUM DECISION AND ORDER - 10

2. Prejudice to ACHD
The Ninth Circuit has repeatedly held that “[t]he prejudice contemplated by Rule
36(b) is ‘not simply that the party who obtained the admission will now have to convince
the factfinder of its truth. Rather, it relates to the difficulty a party may face in proving its
case, e.g., caused by the unavailability of key witnesses, because of the sudden need to
obtain evidence’ with respect to the questions previously deemed admitted.” Hadley, 45
F.3d at 1348. Here, ACHD has the burden of proving amendment of the admissions by
Rhythm would prejudice its presentation of its case. Id.
ACHD argues it will be prejudiced if this motion is granted, because Rhythm
delayed filing the motion for four months after its initial responses to requests for
admissions were served and more than two months after Boydstun’s deposition was
taken. (Dkt. 44 at 9.) ACHD conceded at oral argument that it is not alleging the
prejudice described in Hadley. However, ACHD claims a timing issue —Rhythm filed its
motion after depositions were taken of Rhythm employees in Kansas City—should be
enough to persuade the Court to deny Rhythm’s motion.
ACHD contends, “[a]t minimum, [Grant Niehus and Jesse Manning] will have to
be re-deposed to determine if they stand by their original testimony or adopt the position
currently being taken by their counsel in the Motions at issue.” Id. at 13. 8 Furthermore,
ACHD asserts it will need to question Niehus regarding his actions and whereabouts, and
the ASCT system’s capabilities, during the week of November 18, 2014. ACHD
contends, rather than allowing Rhythm to withdraw or amend its admissions, the Court
8

This argument is perplexing, given all deponents testified while under oath to tell the truth.

MEMORANDUM DECISION AND ORDER - 11

should require the parties to proceed to trial on the original admissions, at which time
Rhythm employees can change their testimony and be cross examined by ACHD counsel
with the benefit of pleadings, deposition transcripts, discovery documents, etc.
In turn, Rhythm asserts the deposition testimony of its representatives would be
unchanged. (Dkt. 45 at 8.) Therefore, ACHD would not “need to retake any
depositions.” Id. Further, because ACHD controlled the information relevant to the
disputed timing calculations of the VAL-T process while it was being performed in real
time, and Rhythm was not privy to the crucial information until it conducted depositions
of ACHD employees, any timing issues are the result of ACHD’s own making. Rhythm
asserts amendment of the original admissions will not prejudice ACHD because ACHD
can present its case via its own witnesses, documents, the Purchase Agreement, and
cross-examination of Rhythm’s witnesses.
The mere inconvenience of retaking a deposition does not rise to the level of
prejudice that justifies denial of the withdrawal motion. See Hadley, 45 F.3d at 1348.
Generally, a much higher reliance on the admissions is necessary to justify denial. Id. For
example, in 999 v. C.I.T. Corp., plaintiff relied heavily on defendant’s admissions, even
going so far as to have shown them to the jury, with no objection by defendant. 776 F.2d
866 (9th Cir. 1985) (defendant’s motion for withdrawal denied in part because it was
made during trial when plaintiff, after relying heavily on the admissions, had nearly
completed its case). In Puerto Rico v. S.S. Zoe Colocotroni, the court denied the
defendant’s motion to withdraw admissions because the plaintiffs’ trial preparation was
materially prejudiced by the fact that plaintiffs canceled depositions once defendant
MEMORANDUM DECISION AND ORDER - 12

admitted liability (and later repudiated). 628 F.2d 652 (1st Cir. 1980), cert. denied 450
U.S. 912 (1981).
In this case, discovery is ongoing and a trial date has not been set. (Dkt. 39-1 at 6.)
The parties have mutually agreed to extend the time for fact depositions, and expert
witness discovery is not yet completed. Id. ACHD has conducted depositions and can
conduct additional depositions if it determines the need to do so. Although the Court
recognizes ACHD may incur some increased litigation expenses as a result of any
depositions it may need to retake, this does not tip the balance in favor of denying the
motion. ACHD can utilize deposition testimony and other discovery documents during
cross-examination of Rhythm’s representatives, lessening any risk of prejudice to ACHD,
due to the amended admissions or costs to retake depositions. 9
Here, if the case moves forward to pretrial motions and to trial with the admissions
Rhythm now claims were based on incomplete and inaccurate information, resolution or
presentation of the merits may be subverted. Furthermore, during oral argument, ACHD
conceded it is not arguing the type of prejudice recognized under Rule 36(b) for denying
withdrawal or amendment of admissions. Because presentation of the merits of this
action will be subserved by amendment of the admissions, and ACHD has not proved
prejudice, the motion for leave to serve supplemental responses to the three requests for
admission will be granted.

9

During oral argument, ACHD suggested what appeared to be a brief line of questioning, might be
necessary if it chose to re-depose Mr. Niehus. The Court encourages the parties to cooperate and attempt
to facilitate telephonic and/or video depositions, to reduce costs, if any depositions are reopened.
MEMORANDUM DECISION AND ORDER - 13

II. Motion to Amend Counterclaim (Dkt. 40)
Rhythm seeks to amend paragraphs 12, 18-19, 21, 24, 28-29, 31-34, 36-38, 55,
and 57-58 in its counterclaim. (Dkt 40-1 at 5.) Rhythm’s proposed amendments relate to
information Rhythm learned in discovery, specifically including the VAL-T timing issue
and ACHD’s actions relative to the testing. The proposed amendments are primarily
limited to the common facts section. Rhythm does not add any counts to its counterclaim,
does not propose any changes to the breach of contract claim in Count I, and adds only
two paragraphs to Count II – Breach of Implied Covenant of Good Faith and Fair
Dealing. Rhythm argues the amendments are necessary for the allegations in its
counterclaim to conform to information learned during discovery. Id. Pursuant to Local
Rule 15.1, Rhythm provided a redlined copy of its proposed amended counterclaim with
its motion. (Dkt. 40-3.) ACHD opposes the motion, arguing the proposed amendment is
untimely and prejudicial. (Dkt. 44.)
A. Standard of Law
A party seeking to amend a pleading after the deadline for amendments must
satisfy the “good cause” standard of Rule 16(b) in addition to the more liberal standard
for amendment of pleadings under Rule 15(a). Once the Court sets its case management
schedule pursuant to Rule 16, the “schedule may be modified only for good cause and
with the judge's consent.” Fed. R. Civ. P. 16(b)(4). The “good cause” inquiry under Rule
16 “is not coextensive with an inquiry into the propriety of the amendment under ... Rule
15.” Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 609 (9th Cir. 1992) (citation
omitted). The focus of the good cause analysis is on “the diligence of the party seeking
MEMORANDUM DECISION AND ORDER - 14

the extension.” Id. Thus, the issue under Rule 16(b) is whether the “pretrial schedule ...
cannot reasonably be met despite the diligence of the party seeking the extension.” Id.
(quoting Fed. R. Civ. P. advisory committee notes (1983 Amendment)) (internal
quotation marks omitted).
“Rule 16 was designed to facilitate more efficient disposition of cases by
settlement or by trial.” Bright Harvest Sweet Potato Co. v. H.J. Heinz Co., L.P., 2014 WL
3341140, at *1 (D. Idaho July 7, 2014); citing Johnson, 975 F.2d at 607-08. “If
disregarded it would undermine the court's ability to control its docket, disrupt the
agreed-upon course of the litigation, and reward the indolent and the cavalier.” Id.
(internal quotation marks omitted); see also Rule 16 advisory committee notes (1983
Amendment). “When determining whether to grant a motion to amend a scheduling
order, a court may also consider ‘the existence or degree of prejudice to the party
opposing the modification.’” Id. (citing Johnson, 975 F.2d at 608.) But, if the movant
“was not diligent, the inquiry should end.” Johnson, 975 F.2d at 608.
If there is good cause to modify the case schedule, the “court should freely give
leave [to amend pleadings before trial] when justice so requires.” Fed. R. Civ. P. 15(a)(2).
The United States Supreme Court, in interpreting Rule 15(a), has set forth the standard to
be applied by the district courts:
If the underlying facts or circumstances relied upon by a plaintiff
may be a proper subject of relief, he ought to be afforded an opportunity to
test his claims on the merits. In the absence of any apparent or declared
reason-such as undue delay, bad faith or dilatory motive on the part of the
movant, repeated failure to cure deficiencies by amendments previously
allowed, undue prejudice to the opposing party by virtue of allowance of
MEMORANDUM DECISION AND ORDER - 15

the amendment, futility of amendment, etc.—the leave sought should, as
the rules require, be “freely given.”
Foman v. Davis, 371 U.S. 178, 182 (1962).
As explained by the Ninth Circuit, the factors identified in Foman are not of equal
weight; specifically, “delay alone no matter how lengthy is an insufficient ground for
denial of leave to amend.” United States v. Webb, 655 F.2d 977, 979 (9th Cir. 1981). The
most important factor is whether amendment would prejudice the opposing party. Howey
v. United States, 481 F.2d 1187, 1190 (9th Cir. 1973). [A] court must be guided by the
underlying purpose of Rule 15 to facilitate decision on the merits, rather than on the
pleadings or technicalities. Webb, 655 F.2d at 979.
B. Analysis
1. Failure to reassert counterclaim
ACHD argues Rhythm does not have an existing counterclaim to amend, because
Rhythm failed to reassert its counterclaim when it answered ACHD’s amended
complaint. (Dkt. 44 at 14.) Rhythm argues its original counterclaim is still valid because
it did not dismiss its counterclaim pursuant to Fed. R. Civ. P. Rule 41. (Dkt. 46 at 3-4.) In
the alternative, Rhythm argues, “if a party mistakenly designates a . . . counterclaim as a
defense, the court must, if justice requires, treat the pleading as though it were correctly
designated, and may impose terms for doing so.” Fed. R. Civ. P. Rule 8(c)(2). Rhythm
contends, if the Court determines Rhythm was required to reassert its counterclaim, the
damages requested in Rhythm’s affirmative defenses may be construed as a mistaken
designation and corrected, making them a counterclaim. (Dkt. 38 at ¶ 10.)
MEMORANDUM DECISION AND ORDER - 16

However, a counterclaim is independent from an answer. AnTerra Grp. Inc. v.
KiVAR Chem. Techs., 2014 WL 12589631, at *3 (C.D. Cal. May 23, 2014). Any
amendments to a complaint, and in turn an answer, do not require a counterclaim to be
reasserted if there are no revisions to it. Id. Thus, the Court finds Rhythm did not need to
reassert its counterclaim when answering the amended complaint.
2. Good Cause under Rule 16(b)
ACHD alternatively argues Rhythm lacked diligence in seeking to amend its
counterclaim, and therefore, the motion to amend should be denied. (Dkt. 44 at 15.)
Specifically, ACHD asserts Rhythm employees participated throughout the FOT testing
phase and expressed no objections, nor raised any concerns with how ACHD described
the “FOT timing in their answer or original Counterclaim.” Id. Here, ACHD argues
Rhythm’s actions in waiting until discovery was “essentially complete,” demonstrate
carelessness. (Dkt. 44 at 15).
Rhythm argues Rule 16(b)(4) is not the proper standard for consideration of its
motion, because it is not seeking to amend the Court’s scheduling order. (Dkt. 46 at 5,
n.1.) However, “even if the good cause standard were applicable, [its m]otion satisfies
that standard as well.” Id. Rhythm contends ACHD misrepresents the facts and evidence
obtained from ACHD during discovery, and misrepresents testimony given by Rhythm
representatives during depositions. (Dkt. 46 at 5-6.) Rhythm asserts Boydstun’s
deposition testimony and Bruce Mills’s email correspondence provide substantive factual
bases for amending Rhythm’s counterclaim. Id. at 7. Moreover, because ACHD retained
unilateral control over the VAL-T testing process, Rhythm was unable to determine the
MEMORANDUM DECISION AND ORDER - 17

true calculation of how many days remained in the VAL-T period until depositions were
taken—specifically, the deposition of Mike Boydstun on December 8, 2016. Id. at 6.
Prior to discovery, Rhythm claims it had no reason to question ACHD’s calculations
regarding how many days remained in the VAL-T testing period and took ACHD’s word
at face value. Id. at 6.
Key in this inquiry is when Rhythm discovered the information upon which it is
basing its proposed amendments. “If a party does not learn of information necessary to
amend its complaint until after the scheduling order deadline, no amount of diligence
would allow the party to seek amendment before the expiration of the deadline.” Mays v.
Stobie, No. 3:08–CV–552–EJL–CWD, 2010 WL 5110083, at *4-5 (D. Idaho Dec.7,
2010).
On November 7, 2016, the Court issued its amended scheduling order and set
November 14, 2016 as the amended pleadings deadline in this case: “The previous
deadline to amend pleadings without leave of the court and the deadline to join parties
(May 31, 2016) is extended to November 14, 2016.” (Dkt. 37)(emphasis added). Rhythm
began deposing ACHD representatives on December 7, 2016, after the amendments
deadline passed. During depositions, Rhythm discovered the information they claim
necessitates amendment of its counterclaim. Accordingly, because Rhythm did not learn
of the pertinent information until after the expiration of the amendments deadline, and
filed its motion seeking leave of the Court for the amendments shortly thereafter, the
Court finds good cause under Rule 16(b) to modify the Case Management Order to the
extent such is necessary.
MEMORANDUM DECISION AND ORDER - 18

3. Amendment of pleadings under Rule 15(a)
i. Bad faith and undue delay
ACHD argues Rhythm’s motion to amend “is not supported by any substantive
factual basis,” and “cannot therefore be considered to have been pursued in good faith or
without undue delay.” (Dkt. 44 at 16.) In support of this argument, ACHD contends
Rhythm had plenty of opportunity to address concerns regarding the FOT timing while
the testing was occurring. Id. at 15. ACHD argues the deposition testimony given by
Rhythm’s own employees, including that of designated Rule 30(b)(6) deponents, directly
conflicts with the proposed amendments to its counterclaim. Id. at 16. Further, ACHD
asserts Rhythm waited until the conclusion of a set of four out-of-town depositions
ACHD was conducting of Rhythm employees to serve the motions on ACHD. Id. at 6.
Rhythm argues the record demonstrates there was no delay in bringing its motion
to amend, and “there is no evidence of bad faith or dilatory motive” as a result of Rhythm
seeking to amend its counterclaim based on the newly discovered evidence. (Dkt. 40-1 at
5.) Additionally, Rhythm asserts “ACHD was in complete, unilateral control of the VALT process,” which prevented Rhythm from having an opportunity to address the timing of
FOT while the testing was occurring. (Dkt. 46 at 6.) Moreover, Rhythm contends it “did
not have any reason to question the representations of ACHD [employees] at that time.”
Id. It was not until the discovery phase of this case when Rhythm learned of the timing
discrepancies regarding when the FOT process began and whether it was completed
before ACHD attempted to return the equipment. Id. at 7.

MEMORANDUM DECISION AND ORDER - 19

While Rhythm did participate in the VAL-T process, it appears from a review of
the record that, during testing, ACHD determined how many days of the testing process
had been completed. Rhythm has provided support for its contention that it was not aware
how ACHD performed these calculations, which are pertinent to determining whether
there was a contractual acceptance of the ASCT system, until it conducted depositions of
ACHD employees. The crucial information for Rhythm’s amendment was obtained by
Rhythm during the deposition of Boydstun on December 8, 2016. On January 25, 2017,
Rhythm deposed another key ACHD representative, Jim Larsen, whose email
correspondence established part of Rhythm’s counter calculations. Rhythm’s motion was
filed February 7, 2017.
Accordingly, the Court does not find Rhythm’s motion to amend its counterclaim
was made in bad faith or with undue delay. 10
ii. Prejudice to the opposing party
ACHD contends prejudice would result if the motion to amend is granted because
amendment of the counterclaim would raise a potentially new issue—whether calculation
of FOT days was accurate—requiring the re-opening of factual discovery. (Dkt. 44 at 16.)
In turn, ACHD agrees this would increase the costs of litigation, by requiring ACHD to
direct resources toward the resolution of issues it previously attempted to resolve via
requests for admission. Id.

10

Both parties suggest a certain amount of suspect gamesmanship has occurred during discovery in
connection with the timing of the requests for admissions and the timing of the motion to supplement
responses. Instead of inferring improper motives to either or both sides in this dispute, the Court has
focused on ensuring this litigation proceeds to resolution or trial on its merits.

MEMORANDUM DECISION AND ORDER - 20

In contrast, Rhythm argues ACHD has failed to establish undue prejudice will
occur if the Court grants the motion to amend its counterclaim. (Dkt. 46 at 8.) Moreover,
discovery is ongoing, there is no trial date set, and ACHD will have sufficient time to
prepare pretrial motions and for trial. (Dkt. 40-1 at 2-6.)
Regarding prejudice, the Court considers the timing of Rhythm’s motion and the
impact of delay which would be caused by the need for further discovery. The Court
also considers whether amendment is consistent with the underlying purpose of Rule
15(a) to: “facilitate decision on the merits, rather than on the pleadings or technicalities.”
Webb, 655 F.2d at 979. Discovery is ongoing in this case and there is no trial date set.
The parties have mutually agreed to extend the deadline for fact discovery to conduct
depositions. The expert discovery deadline is August 14, and dispositive motions are due
July 17, 2017. (Dkt. 37, 42, 47.) Any delay caused by ACHD’s potential need to retake
depositions, or the need for further discovery, would not have a significant impact on the
timing of this case or result in undue prejudice to ACHD.
iii. Futility
ACHD argues Rhythm’s new allegations are in direct conflict with its own
employee’s testimony, and therefore defective and futile. (Dkt. 44 at 16-17.) “Where
proposed new claims are obviously defective or are ‘tenuous’ from a legal or factual
standpoint, the futility analysis weighs against granting leave to amend.” Lockheed
Martin Corp. v. Network Solutions, Inc., 194 F.3d 980, 986 (9th Cir. 1999). 11 ACHD

11

In Lockheed, the court found the amendment was futile because a cause of action for contributory
dilution had not been established. 194 F.3d at 986.
MEMORANDUM DECISION AND ORDER - 21

further argues Rhythm relies solely on Mike Boydstun’s deposition testimony, which was
later itself amended by his declaration. (Dkt. 44 at 17.) ACHD asserts Rhythm should
instead be bound by the earlier deposition testimony of Rhythm’s own employees, and
not be permitted to amend based on information Rhythm learned from ACHD’s
employees during discovery. Id.
Rhythm disputes this characterization of its proposed amendments to its
counterclaim, arguing the motion is in fact “supported by substantive factual bases.”
(Dkt. 46 at 7.) Rhythm argues Boydstun’s testimony, ACHD emails, and a March 2015
ACHD report to the Idaho Transportation Department obtained via a public records
request, all support its assertions. Further, Rhythm argues Lockheed is distinguishable
from this case because Rhythm does not want to add a cause of action to its counterclaim.
Id. Rather, Rhythm is seeking to amend certain allegations so they conform to facts and
evidence obtained from ACHD during discovery. Id.
Although disputed by ACHD, the Court finds Rhythm’s proposed amended
allegations are not obviously defective or tenuous, and therefore, not futile.
CONCLUSION
Presentation of the merits of this action will be subserved by amendment of the
admissions to request for admissions and ACHD will not be prejudiced as defined in Rule
36(b) by supplementation of the three admissions as proposed by Rhythm. Accordingly,
Rhythm’s motion for leave to serve supplemental responses to plaintiff’s first set of
requests for admission will be granted.

MEMORANDUM DECISION AND ORDER - 22

Rhythm learned of the pertinent information necessary to amend its counterclaim
during discovery that commenced after expiration of the amendments deadline, and filed
its motion for leave of Court to amend shortly thereafter; therefore, the Court finds good
cause under Rule 16(b) to modify the case management order. Furthermore, amendment
of Rhythm’s counterclaim is consistent with Rule 15, does not cause undue prejudice to
ACHD, and would not be futile. Accordingly, Rhythm’s motion to amend counterclaim
will be granted.
ORDER
NOW THEREFORE IT IS HEREBY ORDERED:
1)

Defendant’s Motion for Leave to Serve Supplemental Responses to
Plaintiff’s First Set of Requests for Admission (Dkt. 39) is GRANTED.
Defendant must serve its amended responses to Requests for Admission
Nos. 29, 30, and 32 no later than 7 days after the date of this Order;

2)

Defendant’s Motion to Amend Counterclaim (Dkt. 40) is GRANTED.
Defendant must file its proposed amended counterclaim by May 1, 2017.

April 25, 2017

MEMORANDUM DECISION AND ORDER - 23